Nbc Buys Telemundo In $2.7 Billion Deal

October 12, 2001|By Joseph Mann and Magaly Morales Staff Writers

NBC on Thursday became the country's first major English-language television network to plunge into the U.S. Hispanic TV market when it announced the acquisition of Hialeah-based Telemundo Communications Inc. in a deal worth almost $2.7 billion.

This initiative gives NBC, owned by General Electric Co., an important presence in the fast-growing U.S. Hispanic market, virtually ignored by the top English-language networks up to now.

Telemundo is the second largest Spanish-language TV network in the United States, after Univision Communications Inc. of Los Angeles.

The country's 35 million Hispanics make up more than 13 percent of the U.S. population and have purchasing power estimated at $500 billion.

"This signals a fundamental change in how the media are finally recognizing the value and future of the Hispanic market in the U.S.," said Carlos Santiago, partner in Santiago & ValdM-is Solutions LLC, a San Francisco consulting firm. "NBC needs help in reaching English-speaking Hispanics and Telemundo can help them understand cultural nuances and attract more viewers."

"I think it's a great deal," said Steve Mauldin, general manager of the CBS affiliate WFOR Ch. 4 in Miami and two other local TV stations. "I've been very impressed with the people at Telemundo, and their stations in Miami and Puerto Rico are extremely well run. There's great potential for both companies."

The total price tag on the deal, NBC's biggest acquisition to date, is nearly $2.7 billion, including $1.98 billion payable half in cash and half in GE stock, and NBC's assumption of about $700 million in Telemundo debt.

Telemundo was owned by Sony Pictures Entertainment, Liberty Media Corp. and a group of other investors.

When Telemundo was last sold in 1997 it fetched $540 million, according to Hoovers Online business information service.

The company, which says it reaches about 88 percent of Hispanic viewers in the United States, has about 1,600 employees. Univision reaches over 90 percent of Hispanic households.

Both Disney's ABC network and Viacom's CBS studied the possibility of buying out Telemundo earlier this year.

At a time when other media businesses are battling to keep advertisers, Hispanic media has been expanding, and Telemundo has benefited from this explosive growth.

In fact, Telemundo is the nation's fastest-growing television network -- cable or broadcast.

Part of that growth has come at the expense of rival Univision.

A key factor in Telemundo's success, the Colombian soap opera Betty la Fea or Betty the Ugly, moved to Univision. Telemundo will have to compensate with another big hit.

But with the support of NBC, Telemundo has a better chance to lure more viewers with better quality programming.

"With the resources offered by our new ownership, we are going to have even greater opportunities to improve the quality of our network and local newscasts," said Telemundo President and Chief Executive Officer James McNamara, at a media conference in New York. "We are going to be able to improve and develop access to new programs and formats with NBC, and upgrade our overall distribution."

But those new formats would not likely include an old and unsuccessful formula: bilingual programming.

During Telemundo's ill-fated 1998-99 season, when it attempted to attract bilingual Hispanics and even a few English speakers, the network experimented with American classics like Charlie's Angels and One Day at a Time, all remakes in Spanish with English subtitles. But the viewers rejected the experiment and the network's already abysmal ratings went down to single digits.

"We will continue to offer our programming in Spanish, we experimented a little bit with "Spanglish" and it didn't work, McNamara said. "People speak `Spanglish' on the streets, but they don't want to see it on TV."

Telemundo has made strides since McNamara took over in 1999, expanding the network's reach with popular talk shows and soap operas, called novelas in Spanish. During the May sweeps, Telemundo captured a 30 share of Hispanic adults 18-49 years-meaning 30 percent in that key demographic group were tuned in. Most of those viewers, tuned in to watch the network's imported novelas.

Telemundo has four novelas airing in prime time: ProvM-scame or Provoke Me; Pedro El Escamoso or Pedro, the Wannabe, Uga Uga (a Brazilian version of Tarzan) and La Fuerza del Deseo or The Power of Desire, imports from Argentina, Colombia and Brazil.

But challenging Univision and taking some of their market share will be a formidable task. Univision's three top-rated shows, prime-time novelas Carita de Angel or Angel Face, Amigas y Rivales or Friends and Rivals and Por un Beso or For a Kiss are all produced by Mexico's largest novela producer, Televisa, and currently rank at the top of the national ratings.

"The Spanish-language market likes novelas, novelas and novelas, that's basically primetime programming Monday through Friday, McNamara said. "We will continue to provide that kind of programming that appeals to the mosaic that is the Spanish-language market in the United States."

Spanish-language programming appeals not only to Hispanics who don't speak English but also to bilingual viewers, often reflecting a desire to preserve culture and traditions. While many Hispanics are bilingual, they often prefer Spanish language news programs, which provide better coverage of Latin America than English-language networks.

Shares of GE close Thursday at $38.95, up $1.04. Univision shares also rose, closing Thursday at $28.38, up $2.04.

Joseph Mann can be reached at jmann@sun-sentinel.com or 954-356-4665. Magaly Morales can be reached at mmorales@sun-sentinel.com or 954-356-4717.